How to buy non-taxable loan bonds?
Posted on: 01/Sep/2017 2:56:21 PM
Many Income Tax payers indulge in buying non-taxable loan bonds in order to avail tax exemption for their investments. However, most of them are not aware how and where to get these tax-free loan bonds.
A few years ago, many companies were offering non-taxable loan bonds. Some of them were Indian Railway Finance Corporation Loan Bonds, HUDCO loan bonds, and National Highways Corporation loan bonds.
Tax benefit
When you buy a tax-free saving bond, you get an exemption from paying Income Tax. So, when preparing the form for IT, the interest earned need not be shown as an income.
Example
When you start a deposit in the bank and earn an interest of Rs. 10000, this has to be included in the calculation of IT. However, if you buy tax-free bonds, you need not include the interest earned in the IT statement as an income.
Where to buy?
You can buy these tax-free bonds through your same trading account you use for buying shares in the stock market. You can instruct your agent accordingly. Otherwise, if you have an online account, you can buy the tax-free bonds.
However, be prepared the check thoroughly some of the important factors such as the price, interest rate, account closing date, etc.
Analysis
Visit the website: www.nseindia.com. Ascertain the details of the bond you prefer to buy. Once you click the related choice, you will get complete details about the tax-free bond.
Interest Ratio
The price of the tax-free bond and its interest rate are the 2 most important aspects of the tax-free bonds. As an example, when you buy a bond worth Rs. 1000 with an interest rate of 8.1% by paying Rs. 1100, there are only prospects for your interest earned to go down. Though you may earn 8.1% interest, as you happen to be 2nd party buying it at 1100 as compared to the 1st party who bought it only at Rs. 1000. This would reduce your earned interest by a large margin.
Value
In the lied bonds in India, a majority of government –issued tax-free bonds get the rating of AAA. The duration or the maturity period for these bonds are generally 10, 15, or 20 years from the date of release.
When you choose to buy tax-free bonds next time, please gather all details, especially the price and the interest rate, and only then take a decision.
